Circular No. 689

Section 143(1)( a) l Prima Facie Adjustments

What this is

Circular No. 689 was issued by the Central Board of Direct Taxes on 24 August 1994. Its subject is Section 143(1)( a) l Prima Facie Adjustments.

What it does

Confines prima facie disallowance under section 143(1)(a) to four kinds of claim. The provision had allowed, from assessment year 1989-90, disallowance of a loss, deduction, allowance or relief that is prima facie inadmissible on the information in the return or the accompanying accounts and documents, and the earlier instruction was only that nothing be disallowed where two opinions are possible. After the recommendations of the Tax Reforms Committee headed by Prof. Raja J. Chelliah, the Board decides that adjustment may be made only where the claim is incorrect and its incorrectness is apparent from other information in the return, as where the return shows that the unutilised net consideration was not put into the notified account required by section 54F(4); where information that a specific provision of the Act or the Rules requires to be filed with the return to support the claim has not been filed, as with the audit report under section 80HHC(4), and likewise under section 12A(b), 33AB(2), 35E(6), the first proviso to section 43B, sections 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7) and 80-IA(8); where the claim exceeds a statutory limit stated as a fixed amount or as a percentage, ratio or fraction and the material for applying that limit is in the return, as with repairs beyond one-fifth of the annual value under section 24(1)(i) from assessment year 1993-94 or rebate above 20 per cent of the contribution under section 88; and where the claim is patently inadmissible in law, such as income-tax, wealth-tax, personal expenses, depreciation on a conveyance claimed under the head salary or depreciation claimed under house property. Where evidence is filed later, rectification under section 154 is to be made to the extent Circular No. 669 dated 25 October 1993 permits, and nothing may be disallowed for failure to file what only the non-statutory guidance notes for filling in the return ask for. No other prima facie disallowance is to be made without the previous approval of the Commissioner, who is to bring such cases to the Board's notice, and the procedure applies to every return pending processing on the date of the circular.

Why it was issued

Prima facie adjustments were being made too widely, and the Board revisited the earlier instruction in the light of the Tax Reforms Committee's recommendations.

Who it reaches

Assessees whose returns are processed under section 143(1)(a)
Claimants under the export and industrial undertaking deductions who must file an audit report with the return
Assessees whose section 154 applications after filing the evidence are refused
Assessing Officers making adjustments at the processing stage

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.12A	s.332, s.347, s.348, s.349
s.24	s.22
s.54F	s.86
s.80HHC	no counterpart recorded
s.88	no counterpart recorded
s.143	s.270

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 143(1)( a) l PRIMA FACIE ADJUSTMENTS
864. Scope of prima facie disallowances under section 143(1)(a)
Section 143(1)(a) authorises, with effect from assessment year 1989-90, inter alia, disallowance of any loss carried forward, deduction, allowance or relief claimed which, on the basis of information available in the return or the accompanying accounts or documents, is prima facie inadmissible. The earlier instructions of the Board were to the effect that no disallowance should be made of items on which two opinions are possible. The matter has been further considered by the Board in the light of the recommendations of the Tax Reforms Committee headed by Prof. Raja J. Chelliah and it has been decided that prima facie disallowance shall be made only in respect of the following types of claims :
(a) an incorrect claim, if such incorrect claim is apparent from the existence of other information in the return or the accompanying accounts or documents.
EXAMPLE
If a deduction has been claimed under the head Capital Gains under section 54F, and if there is information in the return of income or the accompanying accounts or documents to show that the unutilised net consideration had not been deposited in an account specified in the notified scheme as stipulated under section 54F(4), the claim is incorrect and can be disallowed as a prima facie adjustment.
(b) any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the Rules, to be furnished along with the return to substantiate such claim :
EXAMPLE
If the audit report specified under section 80HHC(4), which is required to be filed along with the return of income, is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit reports or other evidence along with the return of income as required under section 12A(b), 33AB(2), 35E(6), 43B (first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification under section 154 should be carried out to the extent permitted by Board’s Circular No. 669, dated 25-10-1993. No prima facie disallowance shall however be made if any evidence, required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filling in the return of income, is not so filed.
(c) A claim for deduction or rebate of any amount which exceeds statutory limit imposed, if such limit is expressed either as a specific mandatory amount or as a percentage, ratio or a fraction, and if the information relevant to application of the statutory limits appear in the return or the accompanying accounts or documents.
EXAMPLE
(i) If under section 24(1)(i) the deduction in respect of repairs and collection charges to claimed in excess of 1/5th of the annual value (applicable with effect from assessment year 1993-94), such excess can be disallowed as a prima facie adjustment.
(ii) If the rebate on contribution eligible under section 88 is claimed in excess of 20 per cent of such contribution, the excess can be disallowed, provided there is indication of the total amount of such contribution in the return or the accompanying accounts or documents.
(d) Any claim which is patently inadmissible in law.
EXAMPLE
Deduction of items like income-tax, wealth-tax, personal expenses, depreciation claimed on conveyance under the head salary, depreciation claimed under the head house property and the like. The items of disallowance should be such that no two opinions are possible on their inadmissibility.
3. The Board desires that no other prima facie disallowance should be made except with the previous approval of the Commissioner of Income-tax who will, after according approval in suitable cases, bring the same to the notice of the Board.
4. The above procedure applies to all returns pending processing under section 143(1) on the date of issue of this Circular.
Circular : No. 689, dated 24-8-1994.

What to watch

A claim on which two opinions are possible cannot be adjusted at all; that limit survives and governs the fourth category in terms.
The distinction that decides the second category is between evidence a provision of the Act or the Rules requires with the return and evidence asked for only by the guidance notes, which cannot support a disallowance.
Filing the audit report later does not by itself restore the deduction; the route is rectification under section 154 to the extent Circular No. 669 allows.
Any adjustment outside the four categories needs the Commissioner's prior approval, so an unapproved one is open to challenge.
The instruction applies to returns pending processing on the date of the circular, not merely to returns filed after it.

Where you meet it

In an intimation under section 143(1)(a) that disallows a Chapter VI-A deduction for want of the audit report, and in the rectification application against it.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 1/2026 — Circular No. 0 l /2026 23 March 2026
Circular No. 7/2024 — Extension of due date for filing of form no. 10a/10ab under the income tax act 1961 25 April 2024
Circular No. 2/2024 — Order under section 119 of the income tax act 1961 5 March 2024
Circular No. 17/2023 — Order under section 119 of the Income-tax Act, 1961 9 October 2023
Circular No. 6/2023 — Clarification regarding provisions relating to charitable and religious trusts 24 May 2023
Circular No. 22/2022 — Condonation of delay under section 119 2 b of the income tax act 1961 in filing of form no.10a 1 November 2022

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.